Creditworthiness is an important feature which should get reflected by your credit history and give you that much-needed backing to stand up in life in all difficult situations. If you have never taken any loan, then you must know the importance of this to be cautious in life in case you take any in future. In case you already are indebted, you must learn the most about it so that you can tread the next steps carefully. And if you are planning to take a loan, you need to get your concepts clear for the secure financial future.
What is creditworthiness?
Creditworthiness means how much worthy and dependable a person is, that a lender would lend an amount to the person with the commitment of getting back the money as per pre-defined terms and conditions within a tenure. Creditworthiness is reflected by the credit score and credit history of a person. If a person is creditworthy, then credit score will generally be above 750 which indicates a good score. If a person has a score of 650 to 750, then lenders may gauge the person, and may or may not approve a loan based on the analysis. If the person has a score below 650, then in most of the cases any loan or credit card will not be approved to the person.
Why should you be creditworthy?
You should be creditworthy for a better life and planning investments in the future. No one invests on huge dealings by accumulating all the money through years unless the person is a multi-millionaire. The average common man would rather accumulate and save enough money to pay for a down payment of a loan and plan to pay the rest as the loan payback installment gradually every month. This helps take the biggest investments easily. Man can plan to invest big and acquire a home, a property, a business, etc. by such planned investments supported through loans. And for this to happen a good credit score is important to your credit.
Without a good credit score, you cannot get loans approved
If you do not have a sound credit score, then you cannot get approval for a loan. Whatever loan amount it may be, without the backing of a good credit score you are just not eligible unless you are opting for a high-interest rate no credit check loan. In normal conditions, you will only see rejections for your applications. And each such rejection is going to cost you huge. With every rejection, your credit score will also get more lowered, and every rejection will also get recorded in the credit history, and other lenders can view them, thereby your situation being open to all lenders. Ideally, when you face one or two rejections with the reasons of insufficient credit rating, you should stop applying, and start focusing on ways to raise your credit rating from then only.
You cannot get a credit card approved
Getting a credit card also seems impossible at this state when you have a really bad credit score. No credit card issuing company would approve you a card because your creditworthiness will be questionable. The more applications you submit everywhere, the more impacted will be your credit score, just because in most likeliness you will get them all rejected. That’s why the sensible step to this condition would be to find a way to work on your credit score and gradually raise it.
Without a good credit score, you cannot get debt consolidation solutions
One of the biggest pains when you are into multiple debts, and paying a huge amount each month in installments, and are struggling with the finances, is a low credit score. A low credit score in such a situation is a nail on the coffin because you cannot get a debt consolidation loan with a low credit score. And without a debt consolidation loan you cannot lower the rate of interest you are paying, and hence cannot consolidate your loans and get out of the financial stress. And when you cannot get this solution, you are left with the option of debt settlement, which leads to further damage to your credit rating and history. Hence it’s good to maintain a healthy credit score for such situation in life when you may have to depend on that score to get a good solution.
Role of credit score in fetching business loans
The role of credit scores understood vitally when you are trying to get a business loan. To start a business, most entrepreneurs look forward to a loan. Without a loan, the principle cannot be arranged, and the business cannot be started ina good shape. Hence, a business loan is must in a venture, and there you need a sound credit score to qualify for the loan. But when your score is low, you get a big setback. Your plans may get hiccups when you get rejections from banks and private lenders. That’s why it’s important that you look upon maintaining good credit rating on time, before getting into such ventures.
How to increase your lowered credit score
To increase your credit score, the simple steps are to pay back a loan on time and maintain healthy relationships with your creditors. If you are using the credit card, then you should not keep any dues on the card such that you are unable to pay the minimum due each month. Rather you must clear off all card dues on time, and pay back all loan installments of ongoing loans on time. Also, you must take care not to apply for a loan if you are not sure that your credit score is okay.
A credit score that’s well balanced can yield you great returns in life. Life’s many major investments are made on the basis of some borrowing through loans, a line, etc. and these can be made possible only when you are creditworthy. Hence, if you get the opportunity to get a loan even at a higher rate of interest due to your low credit score, you should better take the opportunity and pay back those dues on time accurately. This will trigger your credit rating, and help it get healthy soon.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.
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